Accounting firms, law firms and other third-party vendors to corporations can breathe a sigh of relief these days, thanks to a recent federal appeals court decision that such vendors can’t be held liable in civil suits as “primary violators” of securities laws if they had only tangential involvement in an alleged fraud.
Federal law states that parties cannot be held responsible in private suits for “aiding and abetting” securities fraud under the Securities Exchange Act and Rule 10b-5. Nevertheless, plaintiffs in a suit involving cable television giant Charter Communications claimed that two of the company’s equipment vendors were still liable because they allegedly entered into kickback agreements with Charter to help it artificially boost financial results.
